Country-level reference point and MNE subsidiary risk-taking behavior

While the existing International Business (IB) research primarily focuses on the risk-taking behavior of multinational enterprises (MNEs) as a whole, this study shifts attention toward subsidiary-level risk-taking behavior. Building on the Behavioral Theory of the Firm (BTOF), it accepts that firm risk stems from performance feedback, as organizations compare their performance with a reference point. Thus, this study proposes a novel reference point for an MNE subsidiary, i.e., a country-level reference point, suggesting that deviations below or above this target represent important performance-feedback signals associated with subsidiary risk-taking behavior. Furthermore, it examines the moderating effect of subsidiary age, explaining why this association becomes more pronounced in older subsidiaries compared with younger subsidiaries. An analysis of a large sample of foreign subsidiaries located in Germany, Italy, France, and Spain supports the hypotheses. This study enriches the literature on subsidiary risk-taking behavior and extends the BTOF by introducing a novel reference point within the subsidiary context. Promising new perspectives for scholars and practitioners are offered and discussed.